Sprint Outlines 5G Plans, Posts Smaller Than Expected Q3 Loss

Sprint (NYSE:S) published a smaller than expected Q3 2017 loss on Friday, February 5, driven by its recent postpaid phone subscriber additions and the new U.S. tax law. The company also raised its expectations for the full fiscal year, guiding free cash flows of $500 million to $700 million after previously expecting break-even, while increasing its outlook for operating income to $2.5 billion to $2.7 billion, from $2.1 billion -$2.5 billion previously. Below, we provide some of the key takeaways from the company’s earnings. Our interactive dashboard analysis outlines the results as well as what to expect from Sprint for the full fiscal year.

We have a $6 price estimate for Sprint, which is about 15% ahead of the current market price. We will be updating our valuation model and price estimate to account for the earnings release.

Sprint added 184k postpaid phone subscribers, marking its tenth consecutive quarter of postpaid phone subscriber additions. That said, the metric was down from the 368k postpaid subscribers it added in the year-ago quarter. This was likely due to greater competition from AT&T and Verizon, who have accelerated their subscriber adds in recent quarters, and slightly less aggressive promotions from Sprint. However, Sprint’s net adds stood at about 20% of the total industry adds, and almost double the company’s market share of 12%. Sprint’s postpaid churn also saw an uptick, rising from 1.67% to 1.8%. The prepaid business fared well, adding 63k customers led by the Boost Mobile brand. This compares to a loss of 460k prepaid customers in the year-ago quarter.

Sprint also announced plans to launch its mobile 5G network in the first half of 2019, potentially making it the first U.S. carrier to launch a nationwide mobile 5G network. The company sees the deployment as a means of increasing pricing on its unlimited plans, as customers could be willing to pay more for higher speeds. For instance, Sprint expects the price for its unlimited plans to jump from the current $50 to $60 levels to roughly $70 to $80, which is more in line with its competitors. Sprint appears to be shooting for a relatively capital efficient strategy for its 5G deployment, leveraging its deep portfolio of 2.5 GHz spectrum, while increasing its tower count by around 20%. It will also deploy a sizable number of small 5G transceivers, including 40k outdoor small cells, 15k cable strand small cells, and as many as 1 million self-configuring small cells called Sprint “Magic Boxes” that consumers can set up.

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